Fletcher Building capital raise weighs heavily on NZ sharemarket - Market close

Mainfreight fell 93c to $70.77. Photo / NZME

Fletcher Building’s eighth capital raising in two decades – this one to the tune of $700m – weighed heavily on the New Zealand sharemarket in posting a fall of more than 0.5%.

The S&P/NZX 50 Index was up and down all day and closed at 12,404.17, down 74.33 points or 0.6%. There were 64 gainers and 83 decliners on the main board, with 44.63 million shares worth $170.75 million changing hands.

Fletcher Building, the country’s largest construction company, went into a trading halt after announcing the $700m capital raising to reduce debt and strengthen its balance sheet. It is also reducing gross overheads by $180m in the 2025 financial year.

Fletcher is raising $282m through a fully underwritten institutional placement and $418m from a pro-rata entitlement offer to shareholders at $2.40 per new share. Fletcher last traded at $2.89. Shareholders will receive one new share for every 4.49 shares held.

In a presentation, Fletcher said with more than 50% of revenue exposed to residential construction, the 30%-40% decline in Australia and New Zealand housing activity over the past two years had weighed on Fletcher Building’s earnings.

Matt Goodson, managing director of Salt Funds Management, said following the Auckland International Airport capital raise, the Fletcher issue placed funding pressure on the market.

It was Fletcher’s eighth equity raising since 2003, the previous one was $750m in 2018 at $4.80 a share, he said. “The latest one is $2.40 a share and in 2021-22 Fletcher bought back ($300m worth of) shares at prices $7 and more.”

Goodson said part of the reason for the new raising was the economic cycle but the company “has been utterly misgoverned and mismanaged over a longer period of time”. Along with the raising, Fletcher has left its earnings guidance open and there is continued doubt going into the annual meeting.

“It will be interesting to see how the stock trades after the raising. Fletcher’s shares are heavily held by key Australian shareholders and it will depend on their reaction from here,” he said.

Goodson said there were some random moves on the market following the chaotic closing on index changes on Friday.

Auckland International Airport, whose weighting on the NZX increases to 8.5% at the end of the week, increased 10.5c to $7.25 on trade worth $59.87m after falling more than 4% on Friday.

Contact Energy, which opened its $200m green bonds offer, was down 23c or 2.82% to $7.92; a2 Milk shed 17c or 2.91% to $5.68; Spark declined 11c or 3.35% to $3.17; Ryman Healthcare fell 20c or 4.49% to $4.25; Mainfreight eased 93c to $70.77; and Freightways was down 16c or 1.79% to $8.80.

Skellerup was up 11c or 2.47% to $4.57; Manawa Energy gained 8c to $5.02; Ventia Services added 12c or 2.4% to $5.12; and Turners Automotive increased 10c or 2.2% to $4.60.

PGG Wrightson collected 10c or 5.56% to $1.90; Seeka was up 7c or 2.79% to $2.58; and SkyCity increased 5c or 3.68% to $1.41.

Tower gained 1.5c to $1.225 after renewing its reinsurance programme for the 2025 financial year and increasing its catastrophe upper limit to $800m, from $750m, as well as expanding cover for a third catastrophe event to $85m, up from $75m.

Tower’s catastrophe reinsurance excess is $18.75m for the first two events and $20m for a third. It will pay 11.7% of total income for reinsurance cover, down from 13.9% in the previous year.

Goodson said Tower looked to be heading for a significant profit upgrade next year as the reinsurance was replaced at cheaper rates than analysts expected.

Port of Tauranga declined 12c or 2.1% to $5.59; Colonial Motor Co was down 20c or 2.86% to $6.80; Scales Corp shed 9c or 2.53% to $3.47; Smartpay eased 4c or 3.81% to $1.01; Third Age Health was down 5c or 2.27% to $2.15; and Eroad decreased 3c or 2.38% to $1.23.

In the property sector, Argosy added 3.5c or 3.35% to $1.08; Investore was up 2c to $1.19; Goodman Trust was down 7.5c or 3.43% to $2.11; and Precinct eased 1.5c to $1.23.

Delegat Group increased 13c or 2.26% to $5.88; ikeGPS gained 3c or 5.26% to 60c; Burger Fuel added 1.5c or 5% to 31.5c; Savor rose 1.5c or 6.82% to 23.5c; and Cooks Coffee improved 1.5c or 5.36% to 29.5c.

Heartland Group, up 1c to $1.03, has appointed group chief financial officer Andrew Dixson as the new chief executive to replace retiring Jeff Greenslade on October 1. Dixson has been with the bank for 14 years.

Heartland also said the deputy group chief executive role is being disestablished and Chris Flood will leave on October 31.